To be or not to be? The ethical conundrum at the heart of fintech and banking

Australia has been hit, yet again, by another round of ethical failures by its largest bank, Commonwealth Bank of Australia (CBA). And it couldn’t come at a worse time for the bank, arriving hot on the heels of a recent financial planning scandal, which looks to have robbed thousands of Australians of their life savings at the hands of, what the bank deem to be, ‘rogue’ planners.

A recent investigation into CBA’s life insurance arm, CommInsure, suggests it had sunk to new levels of financial ethical lows, accused by its former Chief Medical Officer of robbing a number of terminally ill policy holders of their dignity and insurance payouts, by refusing to honour life insurance policies.

While rather one sided, the Four Corners investigation has thrown yet another spotlight on what is possibly a seriously, or even terminally ill culture at CBA. Despite courageous efforts by the executive team in the past year to steer the ship in the right direction, getting ethics right is proving to be a formidable task.

Fintech startups may find it easy to sit back and bemoan the ethical failures of CBA. But given the same degree of market power and reach, it’s difficult to nail down exactly what they are doing so differently that would immunise them from similar outbreaks if they were to reach the scale of CBA. Last time I checked most fintech startups were still profit driven, answerable to shareholders – private or public – and operating by very similar business models to banks.

So does that mean ethics and profits are a case of ‘never the twain shall meet’? As scandal after scandal hits closer to home, it’s a multi-billion dollar question society at large is getting restless to have solved. Precedents have been set in some areas of finance, like ethical investing, indicating that finding a balance is possible – and profitable. But for general banking and fintech, where to from here?

Re-humanise finance

Well, a good place to start would be to tackle the ‘re-humanising’ of finance. Too often policy holders or individuals are seen through the prism of dollar signs and annual bonuses, rather than as the people they actually are. To re-humanise our thinking, fintechs and banks can start to challenge the groupthink that suggests good, impartial and professional decision making is without emotion.

Ignoring our intuition on the basis of aspiring towards amorality, or not asking questions that help us better understand if a decision is ‘good’ or ‘bad’, carries, as financial scandal after financial scandal has shown us, a high societal cost.

A study involving 200 bankers, conducted by author and investigative journalist Joris Luyendijk highlights this exact point. His work has led him to believe that one of the fundamental root causes of the banks’ issues with ethics is an absence of moral driven decision making frameworks. Instead, he argues, there is a subconscious endorsement of amoral attitudes, designed to drive employees to evaluate decisions based on one primary principal – whether an action is legal or not. “In the City [of London]…you do not ask if a proposal is right or wrong,” Luyendijk finds his interviewees stating, “you look at whether the plan is profitable and whether it is compliant, i.e. in accordance with the law.”

Through his interviews with bankers, he observed a predilection towards, “terms that seemed designed to sidestep any possibility of an ethical discussion.” Phrases such as “tax optimisation” or “tax-efficient structures” being two examples of a number of terms used by bankers to compliance-wash morally grey actions.

Hiding behind bank-speak stops us from saying, ‘this doesn’t feel right’. Creating a culture where bank employees aren’t afraid of saying, ‘this feels wrong’ must be paramount to any ethics initiative. Sometimes, in the moment, it is hard to pinpoint exactly what causes our highly attuned intuition to kick into gear. But even so, simply voicing our concerns enables us to workshop with our peers what is at the root of our unease.

The next question then is, how do we let healthy emotion find its place in the industry?

Banking Oaths

Initiatives like Australia’s The Banking and Finance Oath and the Netherlands Bankers’ Oath are providing some frameworks for bankers and fintech to create cultures that allow employees to tap into these emotional decision making pathways. They also offer fintech startups an opportunity to dissociate themselves from the sector’s past failures. In the Netherlands, they are seen as an antidote for a sector which has seen its fair share of banking woes, thanks to the Libor fixing scandal that engulfed Rabobank. Swearing on the Bankers’ Oath has been mandatory for all Dutch bankers since April 2015.

Taking an oath is one thing, but putting theory into practice is another. We need to regularly role-play and coach our teams on how to implement ethical decision making. That means designing and workshopping how we would deal with certain scenarios, so that when it comes crunch time, when real lives and money are on the line, we can be more confident of putting our ethical oaths and theory into practice.

Moral Imagination

This last one touches on the energy and creativity we need to harness in order to marry ethical outcomes with successful business results. Many of us have been falsely led to believe the two are mutually exclusive. This is often not the case, so long as we are prepared to go the extra mile to find an acceptable solution that caters to both demands.

We have shown as a sector that we can be endlessly creative when it comes to inventing new ways to make money. What if we were to direct equal energy to finding ways to be ethical at the same time? It might throw off some surprising results. Either way, when faced with an ethical dilemma, which at face value appears we are forced to choose between profit or people, we need our teams to have the courage to turn this on its head and try to achieve both.

Ethics starts with each of us

Like any untrained skill, ethics takes daily practice. It also requires a combination of top down leadership and bottom up pressure for an organisation to truly live and breathe what it preaches. But more than that, it takes individuals to start conversations with their peers and to actively consider their own, however small, daily business decisions in the context of what is ethically right.

Ethical outcomes in profit driven environments is a challenge that belongs to all of us in the financial sector, not just to Commonwealth Bank. The tragedy of the financial commons, of which we are all a part, is displayed in the erosion of trust that occurs when unethical behaviour is found to be widespread. If the media reports and senate inquiries are to be believed, then Australia’s big banks have some fundamental ethical issues they need to resolve in order to restore harmony to the commons at large.

Leadership begins with the individual, and is found in action, not in rhetoric. Unfortunately it is easy for leadership on ethics to fall into the latter category. Fintech and banking can work together to disrupt the false dichotomy that ethics and profit cannot coexist. Society is relying on us now more than ever to do so.

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Jessica Ellerm

2Comments

As you pointed out, scandals seem to find more places to fester and grow in more established firms, from banks to insurance companies. That’s why I think watching how emerging fintech players behave as they grow will be interesting.

Most fintech startups would probably say they plan to ‘re-humanise finance’ in one way or another, and their initial success all depends on making ethical decisions that are best for their customers. But how will that change when they get a valuation and customer base big enough to answer to shareholders instead?

Looking at a mature startup in another industry, I admire WhatsApp founders Jan Koum and Brian Acton for their continued commitment to secure and private communication on their app, even under pressure from courts and Congress in the US. Koum hasn’t forgotten what it was like to grow up in the USSR during communist rule and that experience still influencing his company’s ethical position on privacy.

As a fintech startup ourselves, all this time spent shaking hands and kissing babies means we couldn’t distance ourselves from prospective customer needs even if we tried. For example, our commitment to a no fee model on our payment app isn’t just a marketing ploy – it’s also an ethical position that prevents us from ever bringing in the kind of stealthy hidden fees that banks reap from current account holders.

I’d love to see the financial industry embrace the kind of transparency that ethical clothing company Everlane is pioneering: revealing the costs and profit margins for each garment, and the factory and fabric that goes into each.
We can dream!

Hi Aileen – thanks for sharing your journey! Ethical dilution is what we must all fight as the startups we work for grow and achieve success. Even the smallest breaches of what is ‘ethically right’ can be the start of a much bigger snowball of problems – as we are seeing here in Australia. I think every commercial strategy or decision we make should be held up against an ethical checklist, or at least everyone around the decision making table should feel comfortable to speak up and say ‘this just doesn’t feel right’, without necessarily having to have the reasons to hand. Inevitably, these then fall out in the ensuing conversation. Sometimes our gut just knows before our brain!